If you’ve used the Help to Buy scheme to get onto the property ladder, you may now be wondering about the next step: buying out the shared equity portion of your home. As your circumstances change—whether that’s through an increase in income or a rise in house prices—you may be considering remortgaging to buy out the government’s share. This is a big decision and one that requires careful consideration.

In this article, we’ll walk you through the pros and cons, what to think about when applying for a remortgage, and how Strive can help you navigate the process with ease.

Considerations When Buying Out Help to Buy Shared Equity

Before you rush into applying for a remortgage to buy out your Help to Buy loan, it’s essential to consider both the pros and cons:

Pros:

• Full Ownership: Buying out the equity means you no longer owe a portion of your home to the government, and you’ll have complete control over your property.

• Potential for Lower Monthly Payments: Without the monthly payment on the equity loan (which is typically 1.75% of the loan value), your overall monthly mortgage payments could decrease.

• Equity Growth: As the property market improves, you’ll benefit from 100% of any future increase in the value of your property, rather than only your share.

Cons:

• Higher Mortgage Payments: Depending on how much you need to borrow to buy out the government’s share, you could be looking at higher monthly mortgage payments.

• Affordability: If you’ve been in your home for a while and house prices have risen, the government’s share could be worth a substantial amount. You’ll need to ensure that you can afford the higher loan.

• Fees: There are likely to be additional costs involved, including possible valuation fees and exit fees (if you’re still in a fixed-term deal with your current lender).

How to Apply for a Remortgage to Buy Out Help to Buy

If you’re ready to buy out your Help to Buy loan, the process typically involves applying for a remortgage. Here’s a simple breakdown of the steps:

1. Check Your Current Situation: Assess your finances, the value of your property, and your current mortgage to determine how much you need to borrow. Consider how much equity the government has in your home, as well as any fees you may need to pay.

2. Contact Your Lender (If You’re Fixed In): If you’re currently in a fixed-rate mortgage, it may be worth approaching your current lender first to discuss your options. This can help you avoid early exit fees and potential penalties for breaking your deal early.

3. Shop Around for the Best Deal: Even if you are happy with your current lender, it’s worth shopping around to see if there’s a better remortgage deal available for you. Mortgage brokers can help you find the best deals tailored to your situation.

4. Apply for the Remortgage: Once you have a clear idea of your finances, you’ll need to submit a remortgage application. Your lender will likely ask for documentation, including proof of income, the property’s value, and your current mortgage details.

When is the Best Time to Buy Out the Help to Buy Loan?

Timing your remortgage to buy out the Help to Buy equity loan is important. Here are some things to keep in mind:

• When Your Financial Situation Improves: If your income has increased, you’ve built up more savings, or house prices have risen, it could be the right time to buy out the government’s share. Your lender will assess your affordability, so make sure you’re in a strong financial position.

• When Interest Rates Are More Favorable: If interest rates are low, this is an ideal time to remortgage. It could allow you to secure a lower rate and save on long-term costs.

• If You’re in the Early Stages of Your Mortgage: If you’re early in your mortgage term and house prices have increased, remortgaging may allow you to lock in a lower loan-to-value (LTV) ratio, potentially resulting in a better mortgage deal.

Do I Have to Buy It All Out, or Can I Do It in Stages?

Good news—you don’t have to buy out the government’s share all at once! Help to Buy allows you to buy out the equity in stages. This means that if your finances aren’t ready for the full buyout, you can make partial repayments to reduce the government’s share over time.

However, keep in mind that some lenders may have different criteria on partial buyouts. It’s worth discussing your situation with a mortgage broker to understand the best approach for you.

How Much Can I Borrow?

How much you can borrow will depend on various factors, including:

• Your Income: Lenders will consider your income and existing debts to determine how much they’re willing to lend you.

• Property Value: If your home has increased in value, you may be able to borrow more to buy out the government’s share.

• Your Deposit: A larger deposit means you’ll be able to borrow more easily and may secure a better rate.

Typically, lenders will lend you up to 4.5x – 5x your income, though this varies depending on the lender and your circumstances.

Costs to Consider

When buying out the Help to Buy equity loan, it’s important to budget for several costs, including:

• Valuation Fees: To determine the current value of your home, lenders may require a property valuation.

• Exit Fees: If you’re in a fixed deal with your current lender, there may be exit fees for early repayment.

• Legal Fees: There could be legal costs involved in transferring the title of the property to reflect the new ownership.

• Government Fees: The government may charge you a fee for repaying the equity loan early.

How Strive Can Help

Strive specialises in helping homeowners navigate the complexities of remortgaging, particularly when it comes to buying out Help to Buy equity loans. Whether you need advice on the best time to remortgage, how much you can borrow, or how to approach lenders, our experienced brokers are here to guide you every step of the way.

We understand the nuances of buying out equity loans and will work with you to find the best solution for your unique circumstances. At Strive, our goal is to help you take full control of your property, without the stress.

FAQs

1. Can I remortgage to buy out the Help to Buy equity loan?

Yes, you can. Remortgaging is a common route to buying out the government’s share, and it’s often the most straightforward way to take full ownership of your property.

2. How much will I need to borrow to buy out the equity loan?

The amount you’ll need to borrow depends on the value of your home and the percentage of the equity loan. You may need to borrow more if your property has increased in value since you purchased it.

3. When is the best time to remortgage to buy out the Help to Buy loan?

The best time to do it is when your financial situation has improved, interest rates are more favorable, or if the value of your property has increased.

4. Can I buy out the equity loan in stages?

Yes, it’s possible to make partial repayments to buy out the loan in stages, depending on the lender’s criteria.

5. How can Strive help with my remortgage?

Strive can guide you through the remortgaging process, help you understand the best time to act, and find the best lenders to suit your needs. Our experienced brokers are here to help you buy out your equity loan and take full ownership of your home.

If you’re thinking of buying out your Help to Buy equity loan, don’t hesitate to reach out to Strive. Let us help you take the next step in your homeownership journey!